Counterfeit goods pose a significant problem for manufacturers and consumers of high-ticket items like luxury watches, designer goods and apparel. The quality of high-grade counterfeits has risen to the level where they are hard to tell apart from the genuine items. In many cases, the counterfeits include correct markings such as legitimate serial numbers and all the peripheral materials like certificates of authenticity, warranty cards, tags, seals, manuals, boxes and packaging. Unfortunately, most of these can be forged. Serial numbers alone are insufficient protection because a counterfeiter can mass produce copies of an item, all having the same valid serial number.
FIG. 1 is a diagram of a table reproduced from “The Cult of the Luxury Brand, 2006, Radha Chadha and Paul Husband, Nicholas Brealey International, ISBN-13 978-1-904838-05-0” showing the price difference between a sample of Grade A fakes, which the authors describe as “spitting images of the real thing”, and the real items. When a fake is sold and bought as a fake, both seller and buyer are at least knowledgeable of the fact. But so long as high quality fakes can be made cheaply, there will be the incentive by some people to pass them off as real.
Chadha and Husband state that the World Customs Organization's estimate for the annual sale of counterfeit luxury goods is US$27 billion, which is a quarter of the legitimate luxury industry.
Current Anti-Counterfeiting Technologies
Current technology solutions to thwart counterfeiting may be classified as overt or covert. Overt markers such as holograms, color-shifting films, optically variable inks and devices, fluorescent inks, intaglio printing, and watermarks are meant to be hard to forge, and these markers are intended for the consumer. For these solutions to be successful, the consumer needs to be educated for what a genuine marker looks like.
Covert markers include reactive, infrared, and ultraviolet inks. These markers are intended more for manufacturers, investigators, customs officials and law enforcement. They may require specialized readers, and they are also meant to be hard to forge. They are often hidden to avoid discovery by counterfeiters.
There are machine-readable markers as well, and these may be overt or covert. They include radio frequency ID, magnetic-based systems, and laser marking. These too require specialized readers. Distribution of these readers may need to be controlled as the security of the system may be compromised if a reader made its way into the wrong hands.
These solutions will fail if a counterfeiter is able to buy and use the anti-counterfeiting technology from the marketplace. Overt solutions fail too if the counterfeiter is able to produce forged markers that look good enough, and consumers are unable to tell that they are not genuine.
Verifiability by Consumers is Desirable
A fake that is sold as the real thing hurts the manufacturer and defrauds the consumer. Because of the large difference in price and the potential for profit, some counterfeiters and unscrupulous sellers have the incentive to do this. Many consumers at the same are motivated to buy genuine items at good prices, and good discounts will always be tempting. More transactions are also made remotely and over the internet. Unfortunately, there is not an easy way to authenticate items especially from afar.